Dan Denning – Southbank Investment Daily (Great Britain) –
Today’s letter is a bit of a confession. I’m going to take you back 17 years to a private conversation in the French countryside. I was in the room, but mostly there to take notes and listen. The main parties were a publisher, an economist, a Wall Street man and a Lord. What was discussed then has come full circle today.
First, though, a quick look at the market. At 7,200, the FTSE 100 is still down from its all-time high of 7,354. But surely UK stocks will get a boost from the Bank of England’s about-turn last week. The bank upgraded its forecast growth rate for the UK economy this year to 2%. Post-Brexit the forecast was 0.8%. Then in November – based on strong data – it raised it again to 1.4%. And now 2%.
No matter how grim its Brexit forecasts were, the bank is gorging itself on humble pie with each passing month. Expectations for unemployment were revised down from 5.5% to 5%. And really the only worrisome news is that bullish British consumers will drive the savings rate down 4%. That would be its lowest level since the early 1960s. It would also indicate a high level of Brexit optimism by consumers (optimism clearly not shared by the bank’s forecasters or its Canadian chief).